After accumulating a user community of an astounding 900 million, now the world without Facebook seems impossible. But according to Eric Jackson, founder of Ironfire Capital, Facebook will lose dominance as a major web company in five to eight years.
"In five to eight years they are going to disappear in the way that Yahoo has disappeared," Jackson said. "Yahoo is still making money. It's still profitable, still has 13,000 employees working for it. But it's 10 per cent of the value that it was at the height of 2000. For all intents and purposes, it's disappeared," he said.
According to the research by Jackson, so far there have been three generations of Internet companies. Yahoo, a Web portal, which rose to stardom in 2000, can be considered as an online pioneer. Facebook then swept in as the second generation with the wave of social media. And, the third generation is all about mobile.
"When you look over these three generations, no matter how successful you are in one generation, you don't seem to be able to translate that into success in the second generation, no matter how much money you have in the bank, no matter how many smart PhDs you have working for you," Jackson said. "Look at how Google has struggled moving into social, and I think Facebook is going to have the same kind of challenges moving into mobile."
Facebook's February IPO filing revealed that the company had more than 425 million (about half of its worldwide users) monthly active mobile users during December 2011. But while that number might be impressive, those users aren't making Facebook any money at this point.
Facebook has lent ear to the concern that it isn't doing enough to satisfy mobile users, buying Instagram for $1 billion, and hiring the development team behind the Lightbox Android photo application. "Facebook can buy a bunch of mobile companies, but it is still a big, fat website, and that's different from a mobile app," Jackson said.
Although many financial analysts had expected the company's stock to rocket from the initial offering price of $38 a share to $50 or even $90 a share, the bubble didn't surface. The analysis by Jackson came after this.
But there are also contrarian views regarding the death of Facebook. Patrick Moorhead, an analyst with Moor Insights & Strategy, doesn't agree that Facebook will slip to become a second-tier player in less than 10 years. But he does think the company may have some troubles ahead. "Facebook won't disappear in five years, but I'm confident they won't see the same growth rates as they are seeing today," Moorhead said. "Even with the rise of more vertically-oriented sites like Pinterest, Instagram and Goba, consumers will need a social home-base where all their acquaintances and friends are accessible."
